Recent US India confrontation
Hari Joshi, Indiadaily correspondent for International Trade and Finance
Recent US India confrontation
Hari Joshi, Indiadaily correspondent for International Trade and Finance
Recent trade confrontation between US and India is not
a good news. India wants unrestricted access to the outsourcing market. US wants India to open up like any other country and reduce tariff on
the imported goods. It is true that India is enjoying the best of the two sides. On one hand the domestic industry is sheltered from foreign competition,
and on the other, jobs are coming in truckloads from Western companies in US and Europe related to software and BPO. US wants
Rupee to increase in value. Most importantly US wants India to change the patent laws so that India follows the standard product and process patents. If a medicine is discovered in US by a company, no other company in most of the world can manufacture that medication for many
years. This is protected by international patent laws. In India however, the story is different. The same medicine is manufactured by an Indian company for domestic market without paying any
licensing or royalty fee. The Indian company would follow its own method and process to manufacture the medication. If India has to follow the international patent protocols, this practice will stop and medicines will cost a lot more
in India. Government of India will try and obstruct opening its markets to foreign competition as much as possible. Otherwise the domestic companies can get wiped out. In this politically
charged year that is not happening. However, remember, US is also going though an election year. There is enormous pressure on Bush administration to make India open the market in financial, consumer goods, life insurance and services sector. The theory is as follows: India can have as many BPO jobs as possible from American companies. In exchange American companies should be able to sell as many products and services as possible to the Indian population without too much import duty. The problem is that India is a diverse country with three distinct classes of people. One is the poor and rural population. Second is the upcoming middle
class - educated, urban and with a lot of disposable income. The third is the business community. BPO jobs help the middle class who definitely will cast votes in big numbers. Opening the market to US and other countries hurts the business community who are
the major contributors to election campaign funds for BJP, Congress or any other party. The poor and rural population can get hurt with any changes in patent laws. Through World Trade Organization India may have better chance of marketing its agricultural products at a fair price. Now you know the complications. India will have open up in order to get access to BPO market. Interestingly the export to US is only 13 Billions. Most likely at the end of these trade negotiations, we will see Indian Rupees trading at a much higher value. India will open up it markets slowly over the next five years. It may even create open free
trade zone where one can go and buy international products or services at a discounted tariff. The BPO jobs will slow down to a point where Western companies bring in only those jobs that are essential for serving the Indian economy.
We will keep you informed as this process unfolds.